It feels good to learn that the Enhanced Integrated Framework (EIF) of the World Trade Organisation (WTO) is set to move ahead with some momentum - as the latest developments suggest. The EIF has joined the International Islamic Trade Finance Corporation (ITFC) to provide capacity building support aimed at helping least-developed countries increase their exports. A Memorandum of Understanding (MoU) was signed on the sidelines of the WTO Public Forum on September 27, 2017 to mark the start of the new partnership. It looks like the EIF is now entering a new phase beyond what many observers thought a dead end.
Meant to facilitate the least developed countries (LDCs) with a range of support services in removing their asymmetries in global trade as a whole, the IEF, a multi-donor programme has not delivered what it was expected to, despite much hype at its start way back in 1997. As the WTO Director General has said, "Trade can be an effective tool for economic growth and poverty reduction when the right conditions exist. The EIF was established precisely to help LDCs create those conditions."
The EIF was initially established in 1997 at the High-Level Meeting on LDCs' Trade Development held at the WTO. The core partner agencies of the WTO included the International Monetary Fund (IMF), the International Trade Centre (ITC), the United Nations Conference on Trade and Development (UNCTAD), the United Nations Development Programme (UNDP) and the World Bank (WB).
In a bid to help the LDCs in a wide range of activities, the broad framework of the objectives of the IEF were to:
n mainstream trade into national development strategies;
n set up structures needed to coordinate the delivery of trade-related technical assistance;
n build capacity to trade, which also includes addressing critical supply side constraints.
It is well established that LDCs are essentially characterised by constraints such as low per capita income, low level of human development, and economic and structural handicaps to growth that limit their resilience to vulnerabilities. LDCs, with a total population of 880 million, represent the poorest and weakest segment of the international community. The share of the LDCs in world trade in goods at its present level is only1.8 per cent and is highly concentrated on a few export products. LDC's share in world trade in services remains at only 0.5 per cent.
In recognition of these, there was consensus among the donors to identify the precise areas where the LDCs needed the support most. It was then observed that lack of infrastructure, bottlenecks in transit transport, energy and communications, inadequate policy and regulatory framework severely affect the LDCs' capacity to harness their trade potential. Supply-side constraints such as limited productive capacity, reliance on primary commodities, poor value addition to exports, inability to meet international standards, inadequate technology and know-how and limited access to markets and finance strongly limit their competitiveness.
The EIF currently supports 48 LDCs and three graduated countries with a funding target of US$ 250 million. On the strength of its partnership with ITFC, the scope of ElF's work area is believed to have widened. The ITFC is an autonomous entity within the Islamic Development Bank (IsDB) Group and currently it looks after all trade finance businesses previously handled by various windows within the IsDB Group. This consolidation has enhanced the corporation's efficiency in service delivery by enabling rapid responses to customer needs in a market-driven business environment. Following the signing of the MoU, ITFC's Director, Hani Salem Sonbol said, "We are pleased to be initiating this new partnership, which will be essential in supporting the creation of new trading opportunities in least-developed countries and in contributing to achieving the Sustainable Development Goals. Assisting LDCs, building strategic partnerships and providing integrated trade solutions tailored to the needs of our member countries is at the core of ITFC's mandate."
Observers in the LDCs are also hopeful to see that the partnership marks a vital first step in advancing strategic trade investments in LDCs. In this context, EIF director spoke of a renewed commitment to address the LDC situation in the global trading environment, "We are committed to ensuring that no LDC is left behind and to building a better trading future for the poorer countries. We have identified three key areas of engagement, including capitalising on the EIF analytical framework to help LDCs undertake policy reforms, jointly funding priority projects, and assisting LDCs in strengthening their trade-related institutions."
The MoU aims to significantly increase developing countries' exports, with a view to doubling the LDCs' share of global exports by 2020. This can be expected to be achieved by leveraging resources and providing trade finance to develop LDCs' trading capacities, including through business-to-business exchanges, direct financing and cooperation with other fund providers.
In this connection, it may not be out of place to say that over the years since its coming into operation, there hasn't been much enthusiasm in the LDCs as regards the activities so far in place under the EIF. One of the reasons could be that a separate package dubbed Aid for Trade (AFT) also created to help the LDCs overcome the problems, has been assigned to an overlapping role-- the facilitating services are largely similar to both programmes. Aid for Trade in general and the EIF in particular were designed to help the LDCs through interventions aimed at supporting national trade policy formulation and integration in national development strategies, improving productive capacities, addressing supply side constraints and ensuring coordination among the various development actors and in close consultation with the private sector.
Now that the EIF is set to embark on a new journey, it is important for it to address the needed reforms in key areas in order to improve the efficiency, effectiveness and sustainability of the programme itself. In doing so, stock taking of past activities (not just in numbers) and evaluation in terms of tangible results will be helpful in framing future course of actions.